Readers' comments

"Barclays, for instance, has a market value that is less than half the worth of its assets." Shame on you, Economist writer. What you should have written was that it was less than half the worth of its NET assets. There is a huge difference. You actually make that mistake twice in the article.

Banks are always on the front lines of any financial crisis, especially one caused by the bursting of a credit bubble.
Bank stresses are a consequence of the crisis but also a symptom of the recovery.

The asset quality problem affects banks in creditor countries,like Germany, as much as banks in borrowing countries like Portugal, Greece, or the UK for that matter.
All banks will be penalized until the market has the information needed to distiguish one stressed bank from another.

"Three years ago, when the financial crisis first hit, the German government, like the rest of Europe, quickly defined the problem as an Anglo-Saxon one, and blamed America and Britain. A year later, as the financial crisis widened into a general economic crisis, the Germans retreated into even safer, more familiar territory, redefining the world crisis not as financial but as fiscal – one of deficits and debt.

As a result, Germany has denied any culpability for what has gone wrong. Indeed as long as it can argue that it is not a source of the problem, it can justify resisting costly measures to resolve it.
Yet according to the Bank for International Settlements, Germany lent almost $1.5 trillion to Greece, Spain, Portugal, Ireland, and Italy. At the start of the crisis German banks had 30 percent of all loans made to these countries’ private and public sectors. Even today this one category of loans is equivalent to 15 percent of the size of the German economy.

Add to that heavy German involvement in the credit binge in American real estate (half of America’s subprime assets were sold on to Europe), and in property speculation across Europe, and it is clear that wherever parties were taking place, German banks were supplying the drinks (!).

As a result, Germany’s banks are today the most highly leveraged of any of the major advanced economies, a massive two and a half times more leveraged than their US banking peers, according to the International Monetary Fund.

Indeed, worried about the impact of stress tests on their credibility, German bank regulators have been hostile to the same disclosure and capital accounting requirements agreed on by every other euro zone country, and one Landesbank – the state-owned regional banks in Germany – went so far as to pull out of the tests the day before the results were released."

The above article was written by none other than Gordon Brown.
Until we read his views today, GermanyWatch was not a fan of Mr Brown. However, after reading his honesty on German links to the economic crisis, we have a new found respect for the man.

It seems Mr Brown is of a similar opinion to us- That Germany would like to crush the Anglo-American banking systems.

In general the trend of fixing any economy in this world is only a continuation of the mistakes we have made, and are still making. There is no economist that can help to solve the problems (including lawyers... Ms C. Lagarde) for they are the cause of the problems in the first place. However, the restructuring of our economic thinking should be based on “loving your neighbour as yourself. For your information: The World Monetary Order.

Dr. V: "They (Germany) are the entire problem in the EU, hiding the debt and the truth in reporting ... Why is this NEVER in the headlines?"

It's because you are inventing doomsday scenarios for Germany. These scenarios only exist in your sick fantasies, Dr V alias schadefreude. German investment banks are among the healthiest in the Western world, riding on a healthy economy which has no problems getting financed by German banks (unlike businesses in Britain and the U.S.)

The acquisition of Postbank strengthened Deutsche Bank's retail offering in its home market and Deutsche Bank benefits from this deposit-rich retail bank.

Real Hypo Estate is turned into a “bad bank” anyway, guaranteed by the owner, the German tax payer. The same is true for the Landesbanks, which are fed by the deposit-rich Sparkassen (saving banks).

There is nothing to worry for German banks, schadefreude alias Dr V. . . . and you know this.

Once there is a uniform worldwide electronic currency, everyone including corporations will be taxed at a 20% rate. The BASEL V committee will meet to discuss the Global Financial Recapitalization Tax Act (GFRTA). This act will allow Central Banks worldwide to set tax policy instead of Governments. Governments will collect tax revenue from Central Banks but will not set the tax policy. Both Banks and Governments will appoint oversight committees to ensure that database scripts are written that will automatically deduct GFRTA payments for corporations and individuals. Tax shelters will cease to exist because all currency will be traceable. Offshore and private Bank accounts will be monitored by Governments and Central Banks. Gold and other precious metals stored by Governments/Banking institutions will receive RFID tags to aid with inventory and tracking. The technology for global implementation of electronic currency already exists but is being tested and refined. Electronic currency taxation will give central banks all the power they need to recapitalize the Worldwide banking system and control monetary policy on a global scale.

Its a time to reformulate government policies,
1. Depreciate Dollar in term of other currencies so that their domestic industry could help out increasing their exports to meet Deficit BOP and deficit budget.
2. Issue a discounted markup bonds to alive dwindled market situation.
3. ibor rate is only determinant for flow of funds into market, time deposits should be attracted at relative higher rate in this situation banks can sustain in market
It will helpful in long-term plan.
On other hand current crises will be more worse than sub-prime crises and it will put under-developed countries deep in though.

"The enormous changes in the world can be no excuse for having no view or idea where you belong and where you are going," Kohl, 81, said. Yet not even the EFSF vote will do much to help Europe if the German economic implosion (documented here, here and here) continues. Should her own GDP not rebound, it won't matter one bit whether Merkel succeeds in sending the PIIGS to unseen economic golden ages.

However the biggest threat to her hold on power, should she survive the EFSF vote next month, could be the slowing German economy. Data over the past two weeks showed that Europe's biggest economy ground to a virtual halt in the second quarter of the year.

Business confidence plunged this month by its largest amount since shortly after the bankruptcy of U.S. investment bank Lehman Brothers in 2008. Some economists now see the risk of a recession in Germany. The country's robust rebound from the global economic downturn of 2008/2009, and sinking unemployment, was one asset Merkel thought she could count on heading into the next election. Now that support is crumbling too, wiping away some more of the magic that she exuded in her first years in office, when she was celebrated in Germany and abroad as the "Gipfelkoenigen" -- or Summit Queen -- for brokering deals with in the EU and G8. "Her downfall may not come from the euro crisis, but simply from the fact that she has lost the shine, the sure footing that she had at the start," said Josef Joffe, editor of German weekly Die Zeit. At the end, should Merkel drop out of the picture, and Europe be left with finding scraps of capital everywhere else it can, we can't wait for the ensuing hilarity as the future of a failed European experiment then proceeds to be a burden on the far narrower shoulders of one (AAA-rated) Nicholas Sarkozy.

This conflict will come to a head next month. Merkel's coalition has a comfortable 20-seat majority in the lower house of parliament. But if she is hit with dissent in her own ranks, and is forced to rely on opposition parties to pass legislation to expand the single currency bloc's rescue mechanism -- the European Financial Stability Facility (EFSF) -- then her coalition could collapse, sparking early elections.

"The euro crisis entered a new phase over the past week," influential German weekly Der Spiegel said on Sunday. "Before the main question had been how the common currency could be saved. Now it is also about saving Merkel's chancellorship. If her coalition does not deliver a majority for the enhanced euro rescue mechanism in the autumn, people close to the chancellor say, the coalition is all but finished." On the significance of September 23:

The chances of Merkel failing to secure her own majority in the EFSF vote, which is likely to take place on Sept. 23, still seem slim. Her Christian Democrats (CDU), hovering at a weak 30 percent in opinion polls, have little incentive right now to bring forward an election that is not scheduled to take place until the autumn of 2013.
Merkel's conservative bloc -- composed of the CDU, Bavarian Christian Social Union (CSU) and Free Democrats (FDP) -- has shown discipline in previous euro zone aid votes, with only a handful of lawmakers rebelling. "I expect she will get majority backing from her own coalition," said Gerd Langguth, a political scientist at Bonn University and biographer of Merkel, putting the number of dissenters at around fifteen.
"If it's not enough, Merkel would be forced to resign. It would lead to a crisis. No one is interested in an early election." Slim... but getting bigger: Critical voices from within the party have grown louder over the past week, with senior CDU lawmaker Wolfgang Bosbach vowing publicly to vote against the EFSF increase and popular Labour Minister Ursula von der Leyen -- seen as a potential successor to Merkel -- wading into the euro zone debate with comments that went against official policy.
Helmut Kohl enters the frey: Perhaps most damaging of all, however, was former Chancellor Helmut Kohl's rare public criticism of his protege last week. Kohl plucked Merkel out of obscurity in East Germany after the fall of the Berlin Wall in 1989, bringing her into his cabinet and helping to launch one of the most unlikely and astonishing political careers that Germany has ever seen.
In an interview with newspaper Internationale Politik, Germany's longest-serving post-war leader and father of reunification broke his silence and unleashed a broadside against Merkel's foreign policy, saying it lacked direction and risked undermining Germany's global influence.

Looks like its the end of the road for German Banks and Murkel. Sarkozy looks like the champion. More from Ambrose:

The Beginning Of The End For Merkel... And The Eurozone...
Update: sure enough, here is Ambrose Evans-Pritchard with his own perspective on just this topic, which is oddly comparable to Zero Hedge's: "Mrs Merkel's aides say she is facing "war on every front". The next month will decide her future, Germany's destiny, and the fate of monetary union." Every time we discuss the futility of the nth bailout of [Greece\PIIGS\Europe\the Euro] we make it all too clear (most recently here and here) that the trade off between Germany onboarding ever more peripheral financial risk in one after another all too brief attempt to prevent the implosion of European capital markets and its currency, is not only a relentless creep higher in German default risk (and lower in the German stock market, as August has so violently demonstrated) but increasing political discontent, which after claiming countless political regimes across the world, has finally settled down on one that truly matters: that of German chancellor Angela Merkel. And as Reuters reports, Merkel's disappointing response to an ever escalating set of crises, both domestic and international, means that the beginning of her end (and by implication of the Eurozone, and of the Euro) may be as soon as September 23, when the vote over the expansion of the latest and greatest European bailout lynchpin, EFSF, will take place.

To wit: "Germany's Angela Merkel faces the biggest challenge to her leadership since coming to power in 2005, with traditionally loyal conservative allies openly criticizing her approach to the euro zone crisis and her hands-off Libya policy in shambles....it is Merkel's piecemeal approach to the euro zone's worsening debt crisis that has come under fire over the past week and now threatens her iron grip on power in Germany." The biggest problem for Merkel is that she has gone "Japanese" in the opinion of the public: doing neither nothing, nor enough, to halt the European crisis in its tracks: "For some in Germany, she has gone too far by bailing out stricken euro zone members and agreeing to intervention in the bond markets to prop them up. For others at home and abroad, she has not done enough, shirking bold steps that might solve the debt crisis because they would be unpopular at home." This latest attempt to placate everyone, while achieving precisely the opposite, will come to a head on September 23 when the vote to expand the EFSF takes place: she is for the time being expected to have a sufficient number of votes to pass the critical for the eurozone proposal. "If it's not enough, Merkel would be forced to resign. It would lead to a crisis." And should there be a crisis, it will be the end for the European experiment as well, since with the political situation at the Euro's biggest financial backer in flux, the free fall in European risk will be one that no one, certainly not the ECB, will be able to arrest. Cue even more improvised bailouts by the central banker oligarchy, yet without Germany, the credibility of any and all such deseprate measures will be nil. This incremental political uncertainty will likely make the life of the FOMC's Sept 20-21 meeting slightly easier, as an adverse monetary announcement by the Fed, contrary to that priced in, coupled with the risk of a full blown European crisis, will be very frowned upon by the Status QuoTM.

Seen for much of the past six years as a reliable, steady leader whose competence and knack for brokering deals made up for a lack of bold vision, Merkel's image has taken a beating over the past months and polls show an increasing number of Germans view her government as directionless. The chancellor's troubles can be traced back to two decisions taken in March, when she abruptly dropped her long-standing support for nuclear power in the aftermath of the Fukushima disaster in Japan, and days later backed Germany's abstention from a U.N. vote authorising military action in Libya.

Coming shortly before a crucial state election, which her conservatives subsequently lost, the steps looked to many in Germany and abroad like cynical political ploys to placate domestic opinion. For some in Germany, she has gone too far by bailing out stricken euro zone members and agreeing to intervention in the bond markets to prop them up. For others at home and abroad, she has not done enough, shirking bold steps that might solve the debt crisis because they would be unpopular at home.

Risk aversion is in its prime because we are using debt structures and other macro-economic structures that create those risks without any help from anyone.

In engineering there is a subject called Control Systems Engineering which basically means System Design.

The discipline is that which enables you to drive your car and to do so in comfort and safety, or to manage big machinery and keep it doing what it needs to do as inputs (demands upon it) change.

The subject of Macro-economic Design is not formally recognized as a discipline.

Therefore I am going to start that discipline formally right here and now (on my blog) by announcing the major principles as I understand them that are needed to achieve best control over the economy of nations so that it delivers what we want with the greatest efficiency and with the least intervention.

Your inputs and comments are welcome. They may be placed on the blog or here in this forum.

Volunteers are needed to form a panel for discussion of this subject and my blog on television. Given the right people I am assured by a television person who has researched my background and what people are saying about my ideas, that this will attract advertising revenues for the TV people.

Expert panelists should be knowledgeable in debt structures, marketing, investment and pensions, monetary policy and macro-economics, risk management and actuarial science, all of which subjects are relevant. It is thought that these skills may be found by in a panel comprising: a banker, an accountant, an actuary, and an economist as a base to start from.

I am assured by university lecturers that have attended my seminars that these new ideas will change almost everything that is taught at universities about risk management, economics, banking, investment and so forth.

I have not published before except in parts. This brings it all together in one text.

If only we can blame it all on the sovereign debt. The money pumped into the coommercial banks to save them as well as the economy have beem paid out to the high rank bankers in bonuses and salaries. Rest are used to buy up properties and other things that maintain values even if the value of currencies collapse. In short the govts are taking on more and more debt only to be used to push up prices for properties, commodities, gold you name it. Whole system works like that lady who had a neuro problem which caused her hands to involuntarily slap her face repeatedly.

'Many banks now trade at a deep discount to the value of their assets. Barclays, for instance, has a market value that is less than half the worth of its assets.'

There is a very straightforward explanation: The market obv doesnt blv these banks are valuing their assets appropriately, e.g. their assets are overvalued. As a consequence the markets are adjusting their equity values accordingly.

Printing money alone is a very bad idea, but if the ECB prescribes a trillion € to the market, it should be done in combination with quickly raising interest rates to whatever level is needed to keep inflation under control.

There should be 5 parts to a European monetary easing.

1. The European Investment bank and general business investment should get a prop up of money to encourage entrepeneurship and make money available for business creation.
2. Research and development. A part of the money should go to companies, but should only be made available for their research and development budgets.
3. Consumption. Money should be made available to consume by the people. How this can be done practically is difficult to say, but the money could be used through state budgets for short term tax relief on VAT for example. Meaning the government get the money against lowering VAT for 5 years for example.
4. Banks get the money to prop up their balance sheets.
5. ECB keep buying government debt from all European governments at an amount that account to roughly the same amount and 10 year cost.

This could give European states the momentum to grow and to put into effect leveling their budgets and reducing their debt. To the overall economy, the politicians would then have the time to reshuffel our society from a debt addicted one, to a society that thrives on real time performance.

What we are not hearing is the fact that Germany (wannabe Most Powerful Bank in EU) has dropped from a price of 46 euros down to 27 euros. If this is indicative of the most powerful bank Germany has to offer, start packing your stuff and get ready to get out of town.

They (Germany) are the entire problem in the EU, hiding the debt and the truth in reporting. They should be using IFRS standards to do this, instead of the current HEOB ( Hide Everything Off Book) Method them seem to embrace. You thought ENRON was bad, wait until the EU steps in and seizes Germany's books. Fertilizer has a lower dung content. Why is this NEVER in the headlines?